Commonwealth Bank of Australia
shares have shot to a record high amid growing optimism on world stockmarkets after the United States avoided a potentially disastrous “fiscal cliff" of tax increases and spending cuts.

CBA closed at $63.24 on Thursday, the highest ever for the country’s largest bank as the broader Australian sharemarket gained to its strongest level in 19 months following the breakthrough in the US budget crisis.

AMP Capital Investors chief economist Shane Oliver said the sharemarket rally was set to continue on the back of growing global sentiment.

“The US deal to avert the fiscal cliff combination of tax hikes and spending cuts is not the long term grand bargain that could have been hoped for to address America’s long term budget and debt problems," he said.

“However, by scaling back the bulk of the huge recession threatening fiscal cutbacks that would otherwise have occurred this year, the fiscal cliff deal means that the US economy will likely be able to pick up speed."

After months of negotiations with political opponents, US president Barack Obama signed a budget deal into law yesterday that averted the so-called “fiscal cliff" – a range of tax hikes and spending cuts that were all due to occur on January 1 if an agreement could not be reached, potentially throwing the US into recession.

The benchmark S&P/ASX 200 Australian sharemarket index closed at 4740.7 points on Thursday, the highest since June 2011.

The rally in CBA’s shares has taken the bank’s market capitalisation to over $100 billion for the first time.

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ANZ Banking Group, National Australia Bank and Westpac Banking Corp. also posted sharemarket gains on Thursday, with Westpac closing at its highest point since October 2010.

Mr Oliver predicted the S&P/ASX 200 would reach 5000 points by the end of the year.

“The removal of the fiscal cliff threat is great news for the global economy and explains why shares and other growth related assets such as commodities and the Australian dollar have responded positively to the news," he said.

Morningstar analyst David Ellis said he preferred ANZ and Westpac shares to CBA because they were less expensive.

“We continue to like CBA and value its low-risk profile, stable earnings growth, conservative balance sheet settings and leading IT capability," he said in a report.

“However, Australia’s largest bank by market value is now fairly valued on an absolute basis and relatively expensive compared to ANZ and Westpac."